Citigroup Could Become Hedge Fund Target. Small Investors at Risk? | NowPublic News Coverage

Citigroup Could Become Hedge Fund Target. Small Investors at Risk?

by Markus Schlegel | April 30, 2007 at 03:05 am

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German Reserve Bank (Bundesbank) has recently warned of risks caused by possible takeovers of banks by hedge funds. Now, apparently Citigroup with a market value of well over 260 bn USD could become the newest target of aggressive investors.

The perspective of hedge funds taking over banks paints a dangerous scenario, as hedge funds often use foreign capital (credit) to leverage aggressive takeovers of target companies. It seems easy to imagine what could happen if the institutions deciding on the allocation of such credits are in the hands of those asking for them to finance risky takeovers. One wonders whether, of all possibilities, Chinese banks could once become a save haven for small inverstors' money, if the Chinese governemnt manages to keep a minimum grip on foreign influence on the financial services industry. Probably not, one may respond looking at the very real possibility of the enormous amount of foul credit and an overheated economy that Beijing confronts.

Citigroup
Citigroup Inc executives are worried that hedge funds may pressure a breakup of the world’s biggest financial services company, the Financial Times reported.

The executives believe Citigroup needs to better explain to shareholders the value of keeping its businesses together, the FT said.

Citigroup, which has a market value of $260 billion, has long been considered too big to break up. But when it comes to hedge funds, one Citigroup executive told the FT: "Even Citigroup is not too big. It’s not impossible."

Concerns among the executives have heightened following the campaign by The Children’s Investment Fund, an activist investor group, to force the break-up of ABN Amro, the Dutch banking group. This has resulted in a battle between Barclays and a consortium of banks seeking to break it up.

Chuck Prince, Citigroup’s chief executive, is under pressure to boost its stagnant share price. Critics say the group is too big and complex to manage and that smaller specialist financial companies tend to perform better.